Huatai: Initiates coverage on DIAGENS-B (02526) with "Buy" rating, target price HK$296.13

Huatai initiates coverage on DIAGENS-B (02526) with a "Buy" rating and a target price of HK$296.13. The bank is bullish that, against the backdrop of accelerating release of demand for intelligent medical imaging, the company will leverage its cross-modal model capabilities, hospital collaboration network and clinical data accumulation to continuously improve the development and commercialization efficiency of specialty models, and expand its revenue boundaries through model training, software licensing and per-use revenue sharing, replicating its existing capabilities into more scenarios and driving expansion of total revenue and recurring revenue from model services. Huatai's key views are as follows: AI helps expand and upgrade the medical imaging detection market According to Frost & Sullivan, China's medical imaging detection market is expected to reach approximately RMB116.3 billion in 2026. Huatai estimates that the addressable value pool for AI imaging large models in the medical imaging detection market is approximately RMB11.2 billion. For the procurement needs of hospital research teams, the bank estimates the short-term and medium-to-long-term market sizes at RMB820 million and RMB2.6 billion, respectively. If technological progress drives penetration of imaging AI into more scenarios, or drives rapid iteration of model capabilities, the market space is expected to further expand. The broad value pools of the imaging detection market and medical research lay the foundation for DIAGENS to increase penetration and expand revenue scale. The doctor co-creation mechanism built by DIAGENS balances academic achievements and clinical translation value, and is expected to form a continuously strengthening commercial flywheel. On the one hand, this model can help doctors conduct research projects, publish papers and enhance academic influence; on the other hand, it can drive specialty models into multi-center validation and clinical application, and share application value through intellectual property and achievement translation mechanisms recognized by hospitals and research institutions. Under this benign and win-win cooperative relationship, the company is expected to rely on regulatory access, clinical scenario accumulation and model service capabilities to drive intelligent replacement of manual processes, and achieve scale expansion through software, equipment and continuous model services. A well-developed product hierarchy helps translate platform capabilities into commercial revenue DIAGENS has integrated medical, computing and engineering R&D experience, pioneering the field of AI-based medical imaging. The company uses the 104B-parameter iMedImage foundation model as its technology base, gradually expanding scenario capabilities from reproductive genetics to radiology, ultrasound and pathology, and has built a product system at the commercialization level that coordinates intelligent devices, reagents and consumables, cloud platforms and model services. As of June 2026, the company had cumulatively carried out 158 model projects, cooperated with 99 hospitals, and covered 43 types of organs or application sites and 61 indications. AI AutoVision obtained a Class III medical device registration certificate, further validating the company's ability to translate foundation models into regulatory-grade products. In the first half of 2026, the company's model service revenue increased 101.1% year on year to RMB94.54 million, accounting for 86.9% of total revenue. Platform capabilities are gradually being translated into commercial revenue, and model services have become an important support for revenue growth. In the medium to long term, the company is expected to further expand its business boundaries through cross-disease replication of specialty models and overseas registration. Differences from market views Huatai believes that in the medical imaging market, general large models and vertical models are more likely to form a layered system of "foundation model + specialty application," and clinical implementation still depends on specialty data, physician experience and medical device registration. At the same time, foundation models can reduce the marginal development cost of specialty models. With its foundation models, specialty data, regulatory qualifications and hospital deployment capabilities, the company is expected to precipitate clinical knowledge into reusable, cost-effective small models. The bank expects DIAGENS's total revenue from 2026 to 2028 to be RMB333 million, RMB652 million and RMB1.245 billion, respectively, representing year-on-year growth of 102.6%, 95.9% and 90.8%. The bank adopts a sum-of-the-parts valuation method, corresponding to a target price of HK$296.13 under the neutral scenario.